GHP Funds


SVP I, the debut fund for the firm, closed in December 2002 and invested with four highly successful leveraged buyout funds. SVP I is diversified by sector and geography.

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SVP II is a leveraged buyout fund of funds which closed in December 2006. SVP II represents a continuation of the successful strategy utilized by the predecessor fund, primarily investing with large, top tier LBO and growth equity firms. SVP II is diversified by sector and geography.

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SVP Real Estate I, LP ("SVP RE I"), closed in February 2008, is a private real estate fund of funds. As with SVP I & II, SVP RE I received allocations with historically successful, highly sought after underlying fund managers who pursue compelling investment strategies. The fund is diversified by sector (Office, Hotel, Industrial/Warehouse, Retail and Residential) and geography (U.S., Europe, and Asia/Pacific).

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The GHP Credit Opportunity Fund (“GHP COF”) is a fund of alternative credit and distressed debt funds that is being raised and invested to pursue two specific investment themes: (1) the de-leveraging of European Banks, and (2) the potential for a distressed cycle in U.S. High Yield Credit. GHP COF will pursue complex liquid and illiquid credit opportunities in the U.S. and Europe.

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GHP Library

Monthly Commentary June 2014

The Appian Fund returned 0.43% in June as performance was mixed across managers. The Fund’s Event Driven, Macro and Structured Credit managers contributed positively to performance in June, while the Fund’s Relative Value Arbitrage manager suffered a drawdown during a period of extremely low volatility.

Economic and Financial Market Overview

Investors continued to shrug off both world and market events in June. The specter of two wars globally, as well as a sharp downward revision of first quarter GDP to -2.9%, was not enough to dampen investor appetite for U.S. Equities. The Wilshire 5000 rallied 2.45% in June. The advance in U.S. stocks has been somewhat uneven, with large capitalization stocks significantly outperforming small capitalization stocks in 2014. In fact, as of this writing, small cap stocks were in negative territory for the year.

Investors also continue to seek exposure to U.S. Treasuries, with the long end of the yield curve flattening during the second quarter. The 10-year treasury began the second quarter yielding 2.7% and ended it yielding 2.5%. While 2.5% is certainly low, on a relative basis the U.S. Treasury may appeal to an investor when comparing it to 10-Year Spanish or Greek debt, currently yielding 2.6% and 6.2%, respectively.

Hedge Funds produced generally positive results in June. Event Driven strategies capitalized on a strong environment for mergers and acquisitions and other corporate activity, returning 1.27% in June. Equity Hedge strategies also rode the equity market’s steady rise to a strong return in June.

Appian Fund Performance and Positioning

The Appian Fund returned -0.43% in June, driven by losses in the Fund’s Relative Value Arbitrage strategy. Over the last 23 trading days, volatility across most of the manager’s exposures hit new lows for the cycle. The VIX averaged 11.5 over the course of June, down 8.7% versus May, producing yet another low point for the VIX in this cycle. Since 1990, the VIX has closed below 12 less than 2% of the time, marking June as an outlier in the standard deviation of VIX closes. While challenging for the manager’s strategy that the VIX is more than 20% below its 50 day moving average, that very trend also suggests that an increase in volatility is increasingly likely. We continue to believe that the programmatic removal of Federal Reserve stimulus will lead to price discovery and increased volatility.

On the positive side of the ledger, the Fund’s two Event Driven managers contributed positively to returns in June. The Event Driven Multi-Strategy manager maintains a significant weighting to mergers and acquisitions (46% of their portfolio), and, as stated earlier, the current environment for M&A activity is very positive. Over $2 trillion of deals have been announced thus far in 2014, a 75% increase over the comparable period in 2013. The Fund’s Event Driven–Distressed manager also produced gains in June, led by their position in Greek Bank debt and a basket of Venezuelan assets, including bonds, sovereign debt, the national electric company and the national oil company. As you might conclude, the two managers pursue entirely different strategies in their pursuit of returns, a fact we consider to be a positive in overall portfolio construction.

The Fund’s Structured Credit manager also performed well in June as a bullish tone was present in Asset Backed and High Yield markets. The bulk of the manager’s portfolio is invested in pre-credit crisis, non-Agency, seasoned RMBS, and that trade has been very profitable for the Appian Fund’s manager since their debut in the portfolio in September 2012. That said, superior prospective returns may be found in the CMBS market, and the manager has been rotating their portfolio somewhat in that direction.

Below please find attribution for the Appian Fund for the month of June.

Attribution by Strategy
Event Driven 0.12%
Structured Credit 0.09%
Event Driven – Special Situations 0.09%
Global Macro 0.07%
Market Neutral 0.04%
U.S. Long/Short Equity -0.07%
Tactical Currency -0.13%
Relative Value Arbitrage -0.63%
Net Return -0.43%

We hope you are enjoying your summer, and please do call us anytime. We appreciate your interest in the Appian Fund.

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